When is the right time for restructuring and vendor evaluation?
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The world is changing faster than ever. New technologies are putting business owners on their toes and forcing them to invest in tools that have just emerged. If you notice that whatever got you to this place won’t get you any further, it can be time for major changes. To keep up with all these rapid changes, a company restructuring might be needed.
In today’s globalized market, companies must remain agile to maintain their competitive edge. Realigning the organization’s inner workings can often be an effective solution to this challenge. Corporate restructuring involves making significant changes to your company’s operations, legal structure, ownership, or financial setup to enhance its performance and position in the market.
A restructuring process can take many forms, from reorganizing business units and downsizing to merging with other companies or even acquiring other businesses. When performed correctly, such an overhaul results in improved efficiency and increased profits. If not - well, you lose money, people, and position.
Nonetheless, restructuring can be your best investment if you approach it strategically. Read this article to learn how to recognize if it’s time to restructure your company and discover the outcomes of not restructuring in time.
7 common signs your company needs restructuring
Falling earnings, loss of market position, and internal inefficiencies are the most common signs that it might be time to consider restructuring your organization. However, there are other signs that might push you to invest in serious reorganization.
1. Financial decline
A consistent decline in revenue or profitability is a strong indicator that your operations are not as efficient as they used to be. Whether due to outdated processes, workflow inefficiencies, or external market pressures, financial struggles usually signal the need for a strategic overhaul.
2. Market changes
The only constant in life is change. Unpredictable market shifts, the latest technologies, new competitors, and evolving customer expectations are all factors that impact your company over time. If your business can’t keep up with these changes, it risks losing its market share.
Restructuring can help companies adjust to current market conditions. A recent example of such shifts is Cisco's reorganization, which is undergoing a substantial transformation to pump more resources into three growth areas.
3. Operational inefficiencies
An overwhelming pace of technological and organizational development contributes to the quicker deterioration of processes and procedures. There’s a big chance that a process designed 10 years ago might be suboptimal today. Moreover, the way it interacts with subsequent additions might actively harm your business efficiency.
Legacy systems that worked well in the past can be the source of problems if you start adding new solutions to your infrastructure. Restructuring and looking at your business “from the outside” can help streamline operations and improve productivity in a matter of months.
4. Cultural misalignment
As companies grow and change, their culture can become misaligned with their goals and values. A company with 50 employees will have completely different workflows and methods than a 1000-employee-strong organization distributed across several countries. If these changes weren’t consciously planned and implemented, they have certainly occurred spontaneously.
Improvisation can work perfectly well for a while, but it usually results in cultural misalignment in the long term, leading to low morale, reduced performance, and high employee turnover. Restructuring can help the leadership team realign off-track patterns and build an environment where workers feel good and deliver on strategic objectives.
5. Stagnation
If your company is no longer innovating or growing, it may be time for a big change. Stagnation is often a sign that the current business structure limits employee creativity or that your workforce is stuck in convenient but decreasingly effective patterns. Businesses exist to make money, and restructuring efforts can infuse new energy, ideas, and people into an organization that has stopped growing.
6. Mergers and acquisitions
When companies merge or acquire other businesses, restructuring is often necessary to integrate operations, cultures, and systems. A large-scale reorganization will ensure that all divisions and teams operate efficiently and the company benefits from all owned assets.
7. Regulatory changes
It is one of the less common causes for restructuring, but new laws or regulations can sometimes significantly impact the business landscape. We’ve seen time and time again that one new law can force companies across industries to completely transform how they operate.
Impact of not restructuring
Ignoring the need for restructuring can have serious consequences. The list below provides five common outcomes of avoiding necessary changes for too long.
1. Continued financial losses
Without restructuring, companies that already face financial difficulties often continue to experience declining revenue and profitability, which, over time, lead to cash flow problems, increased debt, and bankruptcy.
2. Decreased competitiveness
Businesses that fail to adapt to market changes risk falling behind more agile and responsive competitors, which results in a loss of market share and harm to brand reputation.
3. Operational decline
Inefficiencies and outdated processes continue to drain resources and slow down productivity, leading to missed opportunities, customer dissatisfaction, and an inability to scale effectively.
4. Employee dissatisfaction
A misaligned culture and unclear strategic direction cause low morale and high turnover. Talented employees leave the company for more dynamic or innovative competitors, further weakening the struggling organization.
5. Increased risk
Regulatory non-compliance, financial instability, and operational inefficiencies all contribute to heightened business risk. Without restructuring, the troubled company becomes more and more vulnerable to market fluctuations, legal problems, and other threats.
Self-assessment questionnaire: Is it time for restructuring?
To definitely determine whether restructuring is right for your company, it’s important to take a step back and assess your current situation.
Consider the 18 questions below to get a clear picture of your company’s current situation.
Financial performance
- Have you noticed a decline in revenue or profitability over the past few quarters?
- Are your operational costs rising faster than your revenue?
- Is your cash flow consistently tight or negative?
Market position
- Are you losing market share to competitors?
- Have new technologies or market trends emerged that you’re not fully leveraging?
- Are your products or services becoming less relevant to your customers?
Operational efficiency
- Do you experience frequent productivity issues or delays?
- Are there redundancies or overlapping responsibilities within your teams?
- Is your IT infrastructure outdated or unable to support your business needs?
Cultural and employee engagement
- Are employees expressing dissatisfaction with the company’s direction?
- Have you experienced higher-than-normal turnover rates?
- Is there a disconnect (miscommunication) between leadership and employees regarding the company goals?
Vendor relationships
- Are your vendors delivering on time and are they reliable?
- Have you conducted a recent evaluation of vendor costs vs. added value?
- Are your vendors aligned with your strategic goals, or is there a conflict of interest?
Regulatory and legal compliance
- Are you up-to-date with all relevant regulations and legal requirements in your industry?
- Have recent changes in the regulatory environment affected your business?
- Are there any pending legal issues that could impact your operations?
Questionnaire results
If you answered “yes” to several of the questions above, it’s likely time to consider restructuring. Minor bottlenecks right now might become huge concerns in a matter of months. And the consequences to your business stability can be enormous.
A restructuring process can mitigate the challenges your company is experiencing and lead to a stronger and more resilient organization. However, before you commit to any major change, it’s reasonable to meet with a consultant who can advise you on the best way to proceed.
It might be possible that the reorganization should happen somewhere else than you think. It may also happen that employing different new solutions will be enough, and you don’t have to restructure at all. A consultancy firm specialized in scaling businesses can help you solve existing problems, upskill your current workforce, and find other ways for sustainable growth of your business.
If you’re looking to improve the way your organization operates, send me a message, and I will connect you with an expert who will guide you on this project.
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